Advertisements
The recent launch event of BYD's "Eye of the God" has truly captured the spotlight, bringing not only capital interest but also consumer enthusiasm for the brandThe concept of "Intelligent Driving Equity" sparked extensive discussions online, leading to a significant surge in the company's stock price, which saw BYD's market value soar back to the trillion yuan mark just in time for the Lantern Festival.
However, as is often the case in business, the ascent of the electric vehicle sector isn't without its challengesWhile various new energy vehicle companies race to embrace intelligent driving technology as a central theme to reach new heights, CATL—another leading powerhouse in the sector—has been busy mapping its pathways for growth.
On February 11th, 2024, CATL officially submitted its application for the overseas listing of its shares on the Hong Kong Stock ExchangeThis strategic move marks the beginning of a significant transformation for CATL as it embarks on entering global markets, with the IPO in Hong Kong as a vital initial step.
The pressing question now is whether the "Battery King," as CATL is often dubbed, can replicate its success in the A-share market during this international expansionCATL's debut on the A-share market on June 11, 2018, was nothing short of remarkableIt took just 24 days from the announcement of its prospectus to obtain approval for its initial public offering, a speed rarely seen amid multiple companies vying for A-share listingsThis was likened to being born with a "golden key."
Fortune smiled upon CATL as it matched its legendary journey with impressive performanceThrough years of rapid development marked by robust technology and high commercial value, coupled with the benefits of being at the forefront of industry trends, CATL evolved into a stabilizing force within the A-share marketIts market capitalization skyrocketed from an initial 78.6 billion yuan to an astounding 1.1 trillion yuan.
Yet, despite these achievements, the past two years have seen CATL's stock price experience a cycle of fluctuations
Advertisements
Although currently, the stock price remains high, up by 70% from 143 yuan per share at the start of 2024, it still lingers below its peak level of 271 yuan per share from early 2023.
The backdrop to this volatility involves CATL's struggles in recent yearsPredictions made by industry leaders indicate that by 2025, China will require a battery production capacity of between 1000-1200 GWhYet, current industry projections indicate capacities nearing 4800 GWh—a situation where supply clearly exceeds demand.
Simultaneously, under pressure from market price wars, CATL has reluctantly adopted competitive pricing strategies to retain users and maintain its market shareReports show that CATL's revenue for the first three quarters of 2024 was approximately 259.05 billion yuan, reflecting a 12.09% year-on-year decline—the first reported dip in revenue since the company went public.
Nevertheless, through effective cost management and leveraging economies of scale, CATL managed to increase its net profit to approximately 36.00 billion yuan, up 15.59% year-on-year, during the same time frameThe adjusted net profit also saw an increase of 19.26%, indicating a resilient profitability stance despite revenue challenges.
However, such a strategy may not be sustainable in the long termEspecially in 2025, as competitors like BYD aggressively pivot towards the smart driving sector, CATL—which primarily caters to battery manufacturing—must urgently explore new growth avenuesThe Hong Kong listing is, therefore, a critical strategic pivot at this juncture.
Exploring overseas markets presents both opportunities and challengesOver the past few years, CATL has systematically accelerated its international expansion plansThis includes the establishment of a joint venture with Stellantis to build a battery manufacturing plant in Zaragoza, Spain, a move that has generated significant buzz within the industry since its announcement in December 2024.
The joint venture, with an investment estimated at 4.038 billion euros, is slated to commence operations by the end of 2026. Additionally, the company's chairman, Robin Zeng, mentioned during the Davos Forum in early 2024 that CATL plans to promote a technology licensing collaboration model with Ford in Europe and North America.
Previously, CATL assisted Ford in constructing its battery plant in Michigan through a technology licensing model
Advertisements
This relationship could help CATL navigate the challenging trade protection policies of the U.S. and explore new channels for its overseas development.
Yet, these international ventures require substantial capital investmentsShareholder reports indicate that CATL's cash reserves outside China stood at a modest 28.7 billion yuan in the first half of 2024, which may be insufficient for long-term expensesAnalysts predict that after listing on the Hong Kong Stock Exchange, CATL's diversified financing options and foreign exchange reserves may be critical, especially considering an overseas investment demand exceeding 100 billion yuan.
Beneath supportive policy frameworks, 2025 is set to witness a wave of A-share companies looking to list in Hong KongBesides CATL, companies like Seres are rumored to be considering similar opportunities; however, official confirmations remain absent.
Despite this, the gloomy performance of CATL's financials in 2024, coupled with the industrial chain's current transition, suggests that the company's IPO journey in Hong Kong may not replicate its A-share debut success, impacting market valuations.
CATL's financial projections reveal that it aims to raise at least $5 billion (~364 billion yuan) through this IPOIf successful, CATL would surpass Midea Group to claim the largest IPO in Hong Kong since Kuaishou raised $6.2 billion in 2021, potentially setting a positive precedent for other A-share companies eyeing the Hong Kong market.
Yet, for CATL, while expanding into overseas markets emerges as a top priority following the Hong Kong listing, it is essential to steadfastly guard its "home ground" in ChinaMultiple automotive manufacturers have already unveiled plans for solid-state battery rollouts, presenting both opportunities and challenges for CATL in the upcoming 3-5 yearsTo maintain its competitive edge and potentially rise above the fray, CATL must be quicker in executing its transformative strategies.
Advertisements
Advertisements
Advertisements
Leave a Comment